Consumer at the centre of Philips philosophy

Such fundamental changes have been taking place in the marketing function of global electronics business Philips that its Sense and Simplicity brand strategy is now more than a tagline, says its chief marketer.

Marketers who focus on the campaign and not the customer anger van Kuyck. He is scathing of communication-led strategies. “Guys, wake up – that’s old-world marketing. People who think it’s all about broadcasting and communication are sadly mistaken,” he says.

Campaign-led marketing is also a fallacy, he says. Instead, he believes that it’s about creating the right experience for consumers, who, if they enjoy it, will spread the word for you.

A dislike for campaign-led marketing doesn’t mean that Philips shies away from promoting its wares. It works with advertising agency DDB and its digital arm Tribal DDB to develop product promotions, including an internet film called Carousel, which scooped the Cannes Film Grand Prix this year.

“Yes, there are still campaigns. They still exist because you do have to create awareness, but advertising is no longer central to a successful long-term business. That is my very, very strong belief,” says van Kuyck.

Rather than continue with unlinked campaigns, van Kuyck says that developing long-term relationships with customers is his priority. He hopes this will move the business away from leading with short-term campaigns that create awareness of certain product features.

He says: “Marketers are going to have to ask themselves ‘am I creating value-added content for my target audience when I run this campaign?’ Unless you understand the relevancy of your content, I don’t think you’ll ever succeed – it’s a waste of breath and a waste of money.”

The customer experience is the only element that a business can now control, van Kuyck argues. Marketing has a hand in defining this experience – from the product manual and customer support to the communication around the product.

Experience-led marketing now dominates the company and van Kuyck claims that understanding how, when and where the customer comes into contact with the Philips brand is expected from the chief executive down.

“We have made a fundamental change in this organisation to move away from the principle that what is important is to reach people through our communication and to hammer them on the head in order to convince people to buy,” he says. “What is important is to create an experience that will create recommendation, which will create promotion for our brand.”

Van Kuyck claims that as a result of this way of working, the “buzz around the brand is getting better and better and better”.

The company advocates the use of the net promoter score (see below), which helps track the way customers rate the business. Van Kuyck admits he even logs into the NPS system for a bit of “lunchtime reading” when he’s in the office because it keeps tabs of what customers think of the business.

While van Kuyck says his role is to be the customer voice in the boardroom, he still has an influence when it comes to business decisions.

The recent acquisition of Saeco International, makers of the well-known Gaggia brand, smells like something that coffee lover van Kuyck was involved in. “I always provide an input,” he says.

But how exactly does a coffee brand fit into the Philips portfolio? “It’s part of home living and plays a fairly substantial role in wellbeing,” he says, giving the impression that he could make a convincing case for any new acquisition to fit the Philips mould.

Coffee is an integral part of van Kuyck’s life from his first drink of the morning to his career path. Outside Philips, he sits on the board of small business Coffee@Company, which he says “helps to keep me honest”.

“Small entrepreneurial companies continue to make you believe that there’s value in €5. When you work in big companies, you can easily forget the difference a small amount of money can make,” he says.

This side project is not van Kuyck’s first experience of coffee. He spent time at Starbucks developing its marketing strategy and says he still carries learnings and beliefs with him from his time at the US coffee company.

“Where Starbucks has played a significant role is driving home the point that it is not only about the insights and the product benefits; it’s about the whole customer experience and whether it is strong enough to make you have a relationship with the brand. It was surprising to me how relevant that message is across so many types of business.”

This philosophy extends to Philips’ local marketing teams across the globe, whose job it is to interpret the global mantra to their particular territory. But van Kuyck argues that making the company customer-centric has enabled much more innovation at a local marketing level.

He gives the example of the Chinese marketing team, which has developed Philips’ largest social media platform. “It’s not in Europe or the US. Why? Because the Chinese marketing team understood what was necessary in that market to build relationships with consumers. And it’s doing very well.”

It will be these developing market processes that will be the focus of the Philips business going forward, says van Kuyck.

He explains: “Once you have a culture of listening and marketing driven innovation and development, what’s fascinating to see is that local marketing teams come up with innovation that can frankly outperform anything coming out of the ivory tower.”

“There are still campaigns. They still exist because you do have to create awareness, but advertising is no longer central to a successful long-term business. That is my very, very strong belief.”

Marketer 2 marketer

Mark Izatt, global consumer marketing manager at mobile phone specialist Vertu, asks: You claim you are passionate about consumers and their needs. How do you escape the confines of the executive floor and engage directly with consumers?

GvK: There are a number of ways. Certainly, as an executive you have to be willing to take trips to be in the market and not only be in meetings.

A few years ago, when I visited India, I did a home visit where I followed somebody in the home during one day. The general manager [of Philips] asked me after the home visit if I liked the experience. “It was wonderful,” I said. “It allows you to stay honest and understand market research much better.”

He then asked if I thought it would be relevant for other people in the company. This gives you an indication that our culture was “inside out”, as opposed to “outside in”. Now people aren’t surprised at all if anyone wants to visit a home or even meet an architect or a lighting designer.

To give myself a broader experience, I also spend a lot of time in conversation with local marketing teams rather than global marketing teams.

And finally, I have online as my resource. I go to websites like Amazon and read customer comments. It’s basic text mining online, but it gives you a sense of what’s going on. We also have our Net Promoter Score (NPS) metric system that gives a continual feedback loop [see box, page 19] and allows any member of the company to find out what’s going on in the business.

Simon Carter, a marketing director for IT company Fujitsu in the government division, asks: We are often faced with the dilemma of what constitutes an innovation in the customer’s eyes. How much of the innovation within Philips comes from customer pleas for a better product or service? And how much comes from the labs?

GvK: We have now re-standardised our innovation around the consumer or the customer as a central point of the innovation process. Culturally, it has been a challenge.

We used to have ways of working that were very much technology driven and we basically turned this on its head. There has been a very significant re-education that has been fairly critical to the company.

Professional healthcare, including radiography, nuclear medicine, resuscitation and ultrasound machines

Home healthcare, including sleep therapy and remote cardiac services

Lighting

Light-emitting diode (LED) solutions

Original equipment manufacturer (OEM) products

Professional products

Consumer products

Net Promoter Score explained

The Net Promoter Score (NPS) is a controversial metric developed by Bain & Co and Satmetrix, which claims to demonstrate customer loyalty. It emphasises the importance of word-of-mouth. Philips’ Van Kuyck believes that the buzz around a brand is the “most critical part of marketing in the new world”.

The NPS scoring system works by getting customers to rate the business out of ten and asks: Would you recommend Philips to a friend and a colleague?

Customers can then be divided into three categories:

Promoters (9-10) are “loyal” customers who claim they will tell others about the brand, which should result in positive word-of-mouth marketing and growth of the business.

Passives (7-8) like the products. They claim they will buy, but are more likely to be seduced by rival companies.

Detractors (0-6) actively dislike the brand and are classed as unhappy customers. They claim they will tell others about the brand in a negative way, resulting in poor word-of-mouth.

To work out a company’s NPS score, you take the “promoter” percentage and subtract the percentage of “detractors”.

While NPS scores are used by brands such as Philips, Lego and GE, there are also many who believe that the metric is not reliable and scores out of ten do not link directly to business growth. They believe that other management metric tools need to be used instead to give more accurate results.

For Philips, however, the NPS metric and results “are as important as market shares and our financial results”, explains van Kuyck. Within the business, a bonus scheme reflects this. Incentives for financial results and NPS scores are at the same level.

My last 24 hours

I’ve just flown back from San Francisco, so I’ve been feeling a little jet lagged. While I was at a meeting in California, a chief marketer of a really well known brand told me his company was undertaking a major reorganisation.

He said: “We’re organising our business again around the customer.” I asked: “Wasn’t the company doing this all along?” and he replied: “Not really. We got obsessed by us.”

That has been the drama of marketing departments over the past decade. Marketers have learned a few tricks and as a result have lost sight of what really is the core of effective marketing.

Marketing is about consumers and customers. It’s about understanding them and developing what performs for them.

Geert van Kuyck biography

Geert van Kuyck completed a masters degree in economics at Katholieke Universiteit Leuven. He began his career with Procter & Gamble, where he spent 15 years, working in various positions in Europe and the US. He then worked for Starbucks for two and a half years as vice-president of marketing for Europe, the Middle East and Africa before joining Philips in 2005. He was promoted to CMO in January 2008. He is also a member of the board of directors at Coffee@Company.

Q&A

Philips’ third quarter results are out and your improved results have been attributed to cost-cutting measures – surely that’s not good news for you and your marketing team?

I think challenging times offer an opportunity to make tougher choices. When times are good, you don’t necessarily ask all of those tough questions. We’ve been, dare I say it, more brutal to effectively grow our business over time. That’s true of most departments.

A lot of companies have a “see-saw” policy with marketing investment. When the going gets tough, marketing spend gets cut and when the going is good, everyone increases marketing spend. That’s really not a successful model.

A successful model is about having a steady-as-you-go investment level. This is the model that we’re following. We’ve learned lessons from previous recessions.

What brutal decisions have you had to make?

I would argue that over the past 18 to 24 months, we have been very explicit that we planned to invest much more substantially in developing markets and be more careful with our investments in mature ones. We’ve been relatively fortunate that we’ve started that trajectory early on.

So you haven’t had to change direction to accommodate a rapidly changing economic climate?

We’ve actually been more bullish. It’s an opportunity to go faster and harder and more rigorously in that direction.

With such a diverse portfolio of brands, ranging from consumer electronics to professional healthcare, how do you decide what to focus on?

The benefit of having to manage such a breadth of portfolio is that you do have to focus on the essentials because there are so many different types of businesses. Unless you focus on trying to create commonality on the essentials, you’re going to confuse the hell out of everybody. Or you’re going to fragment yourself and you can’t manage the business, which is where we were before.

The “Sense and Simplicity” brand strategy aims to give that commonality to all parts of the business, but how does that actually work in practice?

When you have a brand promise like “Sense and Simplicity” you have to find the connection for all of the Philips businesses. For example, how does this relate to healthcare? We have moved away from the notion that we’re making healthcare machines. Instead, we’re saying that we are a company trying to simplify healthcare and healthcare decisions. Suddenly, people think that makes sense.

We’ve done the same thing in lighting and we’re doing the same thing with our consumer products. We have to make a connection.

Once you make that connection with the brand strategy, how do you get consumers to connect with the products? Isn’t it quite difficult to make anyone care very much for a lightbulb, for example?

How do we get people to buy lights? The concept that we developed was “a better switch for a better world”. It’s a very straightforward idea. It came from the notion that people feel powerless to change the world.

We’re saying you can make a switch [to a Philips lightbulb] and that is a simple way to make a difference. If a lightbulb helps to combat climate change, then people can get quite passionate. But who cares about how many more lumens per watt there are compared to a rival brand?

We used to have a technology focused view about what we do and that has changed. The Philips of old probably would have talked about lumens per watt.

Philips has ventures in the business-to-consumer and business-to-business sectors, so how do you market differently to a B2B customer compared with a B2C customer?

We differentiate our consumer and professional businesses mainly through the choices they make. This is done through a complex value chain. Insight work on the consumer side is mainly based around the consumer; but in the professional environment the insight work is not only based around the end consumer, but all the other stakeholders. For a healthcare product, that might be hospital staff, radiologists and nursing staff, for example.

From our perspective, our B2B work is probably more complicated than B2C work to do well. B2B marketing often gets done as a sales activity and marketing becomes sales support. That’s what I would call bad marketing in B2B. To do it well, you have to look at your complex value chain and get right under their skin.

We carried out some insight work based on magnetic resonance imaging (MRI) machines. Our designers, engineers and marketers started digging into the patient experience and the [professionals’ experience] to see what they wanted from this type of diagnostic imaging.

What came out of the research is that patients are often horrified by their experience. As a result, they get a bit scared, nervous and fidgety, so they don’t listen to all of the instructions, particularly children. This creates higher sedation rates, which means more time and means taking up hospital beds for a day.

The team developed a diagnostic experience from the patient’s point of view. Our changes were made to the room, not to the actual MRI machine. It was all about how you experienced the scan in the room. It meant getting our lighting business involved in the project. As a result, you get less [useless] images, lower sedation rates and, overall, a better experience.

Home healthcare appears to be a category that Philips is looking to grow. How important is this sector to the business?

It’s very important. We have a number of initiatives in the area of keeping younger people fit and healthy – this is to do with an active nutritionally balanced lifestyle. That’s more for the consumer side of the business.

Home healthcare is in what I would call the early development phase. An ageing population creates a situation where traditional healthcare systems become less sustainable. We feel that we can optimise healthcare and make it more efficient. But there are a number of players, such as healthcare professionals, that need to get involved – it’s not just about us.

How do you make sure you get a sense of what’s going on outside the industry?

I make it my purpose to accept invitations from people when I have no idea if they can add value or not. Sometimes they truly cannot add value to the company. And then it stops right there.

But then there are conversations that fundamentally change my perspectives on certain things. For example, I had a meeting out in the US with a biologist. And you’re not going to believe it, but we’re going to do a project together.

The project is based on how living organisms behave, and what that might mean for the design organisation and even how it might make you think about communications. Now that was a fascinating discussion.

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